K C Chakrabarty questions payment banks’ viability

Outgoing deputy governor of Reserve Bank of India (RBI) Mr. K C Chakrabarty has questioned the viability of payment banks and has said that they do not serve the purpose of financial inclusion. The statement comes at a time when RBI governor Raghuram Rajan has indicated that the central bank was in favour of issuing bank licences for limited purposes such as payments.

In an interview to a television channel, Chakrabarty said, “My only question about payment banks is what will be their viability? The question is how will they earn money?” The deputy governor also said that financial inclusion was not limited to merely opening bank account. “Financial inclusion is also providing emergency credit. But the maximum request from the poor is for emergency credit.” He, however, added that this was an experiment that should be tried.

The concept of payment banks was mooted by a panel headed by veteran banker Nachiket Mor, who was asked to look into ways and means of extending financial inclusion across the country.

One of the recommendations of the Mor Panel was allowing payments bank which will open accounts for the underprivileged. These accounts will enable the customer to receive funds, deposit cheques and make payments. However, it will not engage in any form of lending and instead park all funds in government bonds.